New York regulators take steps to back upstate nuclear power generation

Boston —
The New York Public Service Commission Tuesday took two steps toward encouraging the continued operation of nuclear generating capacity, but how successful those efforts will be remains to be seen.

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The PSC, in a 4-0 vote, approved a settlement agreement that resolves outstanding issues regarding the continued operation of Exelon Generation's 581 MW Ginna nuclear plant in Ontario. The deal modifies a previous reliability support services agreement between Ginna and Rochester Gas & Electric that was negotiated after a power purchase agreement between them expired in mid-2014.

Sean Mullany, an administrative law judge at the New York Department of Public Service, told the PSC at its monthly meeting that under the deal, Ginna's RSSA with RG&E will expire March 31, 2017, 18 months earlier than the original. RG&E will make a one-time, $11.5 million payment to Exelon to compensate for the shortened term and it will also make monthly payments to Exelon of $15.4 million, $2 million less than it pays each month under the original agreement.

In exchange for the lower monthly payment, RG&E will receive only 70% of the revenue the nuclear unit receives from the sale of power into the New York Independent System Operator's energy and capacity markets, down from 85% in the original RSSA.

PSC staff explained in its endorsement of the settlement in November that the new payment structure is designed to shift more market risk to Exelon and Ginna by reducing the fixed payment the company and its nuclear unit receive but allowing them to retain a greater share of market revenue.

The settlement caps Ginna's total revenue at $510 million during the term of the contract and sets a compensation floor at $425 million, Mullany said.

Other elements of the settlement call for RG&E to make several transmission system upgrades by March 2017 that will address reliability issues should Exelon decide to retire Ginna after the amended RSSA ends 13 months from now.

PSC Chairman Audrey Zibelman said that the terms of the amended RSSA strike "a good balance."

The commission also voted 4-0 to expand the scope of its ongoing consideration of a clean energy standard to examine the possibility of requiring electricity retailers to buy zero energy credits from as many as four upstate nuclear units to help their financial status.

In January, the state's DPS issued a white paper proposing that Entergy's 838 MW FitzPatrick nuclear unit in Oswego and three Exelon units -- Ginna, the 640 MW Nine Mile Point Unit 1 and the 1,205 MW Nine Mile Point Unit 2, also in Oswego -- would be eligible to receive payments through ZECs that electricity retailers buy.

The white paper also called for required power retailers to buy renewable energy credits from wind farms, solar facilities and other renewable generators to help New York meet its 50%-by-2030 renewables goal. Nuclear generation would not be classified as a renewable energy source.

"With all the announced retirements, we could find ourselves in a situation as soon as 2019 in which there's not sufficient generation available," Zibelman said. She noted while it is possible to temporarily "mothball" fossil-fired units if market prices are low, "in the case of nuclear units, that flexibility is not there ... . This is one of those moments in which we can act decisively."